Rethink capitalism

Michael E. Porter, Harvard University professor, explains why business leaders must focus on shared value. Porter recommends a significant rethinking of our present capitalism driven society which aims for creating products and services that benefit not only the company but also society. Such change in thinking with Porter is  a bit  surprising but also most welcome.

Porter recognizes that business and society are too much detached, although both need eachother. The last decades companies were to much focused on profit maximization and pushed products on the markets of which the real benefit to customers can be questioned. It was about selling products without taking into consideration whether that product or service actually served the interest and need of the customer. Also this strategy ignored the environmental effects of such unlimited push for consumption. The most of us now realize that more and more raw material become rare.

Business should step away from the short term profit and consider the long term economic values. This requires a new approach of business. Business, society and environment share common values which need to be incorporated in the business strategy. In fact the wellknown term “what good is for business is good for society” should be reversed into “what good is for society and environment is good for business”

Not longer is being environmentally friendly just for a small group of idealist but is also an economic value. Products and services needs to be aligned with what is really good for people from health point of view and in line what is good for our environment. Business should create new vision on shared values with the environment and society which will be the great differentiators. This will allow business to open new markets and link to new customers and achieve a closer integration with society.

A prerequisite for this are sensible legal regulations to create level playing field. Just volunteer programmes will work for sometime but it does not change the overall thinking, let alone the overall system at present. Incidental programmes by companies or unilateral governmental actions will unbalance the economy. it requires a worldwide approach to change our present capitalistic system.

Fair trade is a good example but its drawback is that it operates from a fixed value of welfare. Companies should work together to create more value for all participant in the supply chain. So expanding the pie. It is about social responsibility and it is in the self interest of companies in the long run.

CSR only is not enough it should be a company broad and worldwide effort. Luckily more major companies taking their responsibility and are examples to other We will learn and transform our way of doing business over time.

A clear point of critique to Porter claim is that rethinking of capitalism might not be enough. The capitalistic system has too many drivers that make people aim for short term profit and success. Installing legal regulations might reduce and control this to a certain level, but the real problem lies in the system itself. Maybe capitalism has seen its best years and is it time to say farewell to it and come up with a completely new system. Possible the recommendation of Porter might lead to this. Hopefully. Cause we are running out of time.

CSR = corporate social responsibility